SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

Commission file number 1-9335

SCHAWK, INC.

(Exact name of Registrant as specified in its charter)

(Registrant’s telephone number, including area code)

847-827-9494

Securities registered pursuant to Section 12(b) of the Act:

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.)     Yes o          No þ

      The aggregate market value on June 30, 2004 of the voting stock held by non-affiliates of the registrant was approximately $73,195,284.

      As of March 8, 2005, 25,847,488 shares of common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the proxy statement for the annual shareholders’ meeting to be held May 17, 2005 are incorporated by reference into Part III.

SCHAWK INC

FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

DECEMBER 31, 2004

PART I

General

      Schawk, Inc. and its subsidiaries (“Schawk” or the “Company”) operate in one operating business segment, Digital Imaging Graphics Arts, that serves consumer products packaging, advertising and promotional markets. The Company has been in operation since 1953 and is incorporated under the laws of the State of Delaware.

      The Company believes it is the largest independent provider of digital imaging graphic services to the consumer products packaging market in the world. The Company’s facilities produce conventional, electronic and desktop color separations, creative design, art production, electronic retouching, conventional and digital plate making and digital press proofs for the three main printing processes used in the graphic arts industry: lithography, flexography and gravure. The Company’s services also include both digital and analog image database archival and management as well as 3D imaging for package design, large format printing, digital photography, workflow management consulting services, and various related outsourcing and graphics arts consulting services. These services require skilled, highly trained technicians applying various computerized design, manipulation and assembly techniques. The preparation of production art, digital files, retouching and image output for printing processes related to packaging and promotions accounted for over 90% of net sales for 2004 and over 85% for 2003 and 2002. The balance of the Company’s business consists primarily of the preparation of graphic images for advertising applications.

      The Company has particular expertise in preparing color images for high volume print production runs of consumer products packaging. The Company functions as a vital interface between its Fortune 1000 consumer products clients, their creative designers and their converters or printers in assuring the production of consistent, high quality packaging materials in increasingly shorter turnaround and delivery times. The Company’s ability to provide high quality, customized graphic services quickly makes it a valued player in new product introduction and promotional activity.

      The Company maintains both digital and analog data archives of product package layouts and designs for many of its clients. This activity brings value to those clients while improving the Company’s efficiency in accommodating clients’ rapidly changing packaging design modifications and product line extensions. By continuing to provide such high-end, value-added services, the Company commands a significant share of the market for graphic services for the food and beverage industry, which uniquely positions it to benefit from positive industry trends.

      The Company believes that its clients have increasingly chosen to outsource their imaging needs to the Company for reasons including but not limited to the following Schawk capabilities: (i) creative design capabilities, (ii) production art expertise, (iii) high quality customized imaging capabilities; (iv) rapid turnaround and delivery times; (v) up-to-date knowledge of the printing press specifications of converters and printers located throughout the United States, Canada, Mexico, Europe and Asia; (iv) color expertise; (vi) digital imaging asset management; (vii) workflow management; and (viii) ability to service its clients’ global graphic requirements through the Company’s North American facilities and international subsidiaries.

Graphic Services Industry

      “Graphic Services” are the tasks involved in preparing images and text for reproduction to exact specifications for a variety of media, including packaging for consumer products, point-of-sale displays and other promotional and/or advertising materials. Packaging for consumer products encompasses folding cartons, boxes, trays, bags, pouches, cans, containers, packaging labels and wraps. While graphics work represents a relatively small percentage of overall product packaging and promotion costs, the visual impact and effectiveness of product packaging and promotions are largely dependent upon the quality of graphic imaging work.

      Graphic services do not entail the actual printing or production of such packaging materials, but rather include the various preparatory steps such as art production, digital photography, retouching, color separation and plate making services. “Color separation” generally refers to preparing color images, text and layout for the printing process. Graphic services such as color separations were traditionally performed by skilled craftspeople almost entirely by hand, using what is known as the “conventional” method. With the development of digital technology, graphics firms such as the Company have become more highly computerized, providing digital imaging services in which digitized images and text are manipulated according to client and converter specifications. On an increasing basis, clients supply material to the Company in a digitized format on a variety of digitally generated media and via the Internet. More recently there is a trend toward an all-digital workflow, from creative design through printing. The industry is expanding the production of plates directly from a digital file, hence the term “direct to plate” (DTP) or “computer to plate” (CTP). This process eliminates the step of preparing photographic film and exposing the film on a plate. CTP technology is more precise and reduces the time to produce a printing plate. The Company has CTP units and has the capacity to service its clients with CTP services, however, the current trend in the market is for printers and converters to provide this service as part of a bundled service to their customers.

      The Company believes that the graphic services industry in North America has over 1,000 market participants, principally independent color separators, such as the Company, converters, printers and advertising agencies that perform these services in-house. The majority of graphic services providers specialize in publication work that includes textbooks, advertising, catalogs, newspapers and magazines. The Company’s target markets, however, are high-end packaging for the consumer products industry, advertising and promotional applications. The North American market for graphic services for packaging to the consumer products industry is estimated by the Company to be approximately $2.0 billion, while the worldwide market is estimated by the Company to be as high as $6.0 billion. The consumer products graphic industry is highly fragmented with hundreds of market participants, only a small number of whom have annual revenues exceeding $20.0 million. The Company believes that the number of participants in the North American graphic services market for the consumer products industry will diminish due to consolidation and attrition caused by competitive forces such as accelerating technological requirements for advanced systems, equipment and highly skilled personnel and the growing demands of clients for full-service global capabilities.

      The rapid development of lower-cost, faster desktop publishing software systems has increased the potential for competition in the graphic services industry by lowering barriers to entry relating to equipment costs. However, increases in governmental regulations, demand for faster turnaround times, the need for global brand consistency and certainty of supply have created greater barriers to entry.

      There is also a more significant barrier to entry that has always existed — hundreds of “technician–years” of expertise in working with all of the major printers and converters to make sure a package is printed according to the client’s specifications. For this reason, new start-ups have difficulty competing with the Company.

      The Company focuses on three primary markets: consumer products packaging, advertising agencies, and promotion. The food and beverage segment of the consumer products industry has packaging requirements that are complex and demanding due to variations in packaging materials, shapes and sizes, custom colors, varying storage conditions and marketing enhancements. Product extensions and frequent packaging redesigns have resulted in an increasing volume of color separation and related work in the consumer products industry and in particular for the food and beverage segment. Additional industry trends include: (i) the shorter turnaround and delivery time requirements from the creative design phase to final distribution of the packaged product; (ii) an increasing number of SKUs competing for shelf space and market share; (iii) the increasing importance of package appearance and promotions due to demonstrated point-of-sale consumer purchasing behavior; and (iv) the increasing requirements for worldwide quality and consistency in packaging as companies attempt to build global brand name recognition. Increasingly, the advertising and promotion markets require coordination of these efforts, with the initiatives coming from advertising agencies. The Company’s expansion into these markets strengthens and enhances the overall service offering to the unified marketing approach of our clients.

      The advertising portion of the Company’s business requires the Company’s personnel to produce final artwork in extremely short timeframes, often less than 24 hours. Creative retouching, color correction and composition in multiple file formats are produced to meet requirements of the clients and the printers. The Company is a leader in conventional, computer to plate and digital ad delivery to publications.

The Company’s Growth Strategy

      The Company’s primary goal is to enhance its leadership position in the graphic imaging market serving the consumer products, advertising and promotion markets. Key aspects of the Company’s business strategy to achieve this goal include the following:

Management Philosophy

      As part of the Company’s ongoing strategic planning process, management of the Company introduced Vision 2020, a roadmap that the Company will follow into the future. Annualy, the Chief Executive Officer, David A. Schawk, provides an overview and update of the strategy to every employee of the Company and subsidiaries around the world. The overriding guidelines for the Company’s strategy are summarized in a “Vivid Description” of what the Company believes in. The Vivid Description of the Company is as follows:

      The business objectives of the Company support the Vivid Description of the Company and are as follows:

      To achieve the Company’s business objectives, management stresses the following:

      Client Service. A key component of the Company’s management philosophy has been its commitment to client service. The Company’s offering continues to be increasingly focused on meeting the changing needs of its clients. This requires a commitment to working with clients to understand these needs. The Company believes that this commitment has contributed to the confidence and loyalty its clients have shown. Because of the increasingly competitive markets faced by its clients, the Company must be flexible enough to modify its operations in order to meet the specialized needs of its clients. The Company’s emphasis on on-site client representatives and operations helps to address this requirement and has further solidified existing client relationships.

      Employee Training and Investment in Equipment. The Company believes that its most valuable assets are its employees because its ability to provide clients with high quality services and products depends upon their dedication and expertise. The Company provides extensive and continuous training to keep its employees abreast of the latest technological developments and the particular needs of its clients. Providing its employees with the latest equipment, software and training are fundamental to the Company’s philosophy.

      Technical Expertise. The Company is able to provide its clients with high quality services and products and quick response time because of its efficient utilization of state-of-the-art equipment, software, computer servers, storage technology, and telecommunication systems. As part of its commitment to maintain its technological expertise, the Company has historically worked with software developers to create software that fully addresses the Company’s and its clients’ needs. The Company acts as a test site for numerous hardware and software products. In order to facilitate the exchange of information among its various facilities, the Company supports Schawk Technical Advisory Board (“STAB”) for the purpose of coordinating the research and evaluation of new technologies in the graphic arts industry. This group is recognized for its efforts and its leaders have been invited to lecture at numerous national and international symposiums and conferences.

Services

      The Company offers comprehensive, high quality digital imaging graphic services. The Company’s facilities produce conventional, electronic and desktop color separations, electronic production design, film preparation, plate making and press proofs for lithography, flexography and gravure.

      The Company’s services also include both digital and analog image database archival and management, as well as creative design, 3-D imaging, art production, large format printing, and various related outsourcing and graphics arts consulting services.

      The Company provides a series of best practices driven advisory, implementation and management services including but not limited to the following: workflow architecture, print management, color management and printer evaluation.

      As part of the strategic planning process at the Company, Schawk’s service offerings within the graphic services umbrella were organized into three core competencies: Brand Strategy and Creative Design, Graphic Services and Enterprise Products.

      Brand Strategy and Creative Design. Under the Anthem Group brand, Schawk offers brand consulting and creative design for packaging applications to its Fortune 1000 consumer products company clients, food and beverage retailers and mass merchandisers. Anthem Group consists of leading creative design companies acquired by Schawk since 1998 in Toronto and San Francisco as well as start-ups in Chicago, New York and Singapore. Anthem Group represents approximately 5% of the Company’s overall revenues and is the fastest growing component of Schawk’s service offerings.

      Graphic Services. Under the Schawk brand, Graphic Services encompasses a number of service offerings including traditional prepress business as well as high-end digital photography, color retouching and large format digital printing. Graphic Service operations are located throughout North America, Europe and Asia. Graphic Service business represents approximately 92% of the Company’s revenues.

      Enterprise Products. The Company develops services in response to its clients needs. Three services that help differentiate Schawk from its competitors are digital asset management, work flow management and online proofing. These services are available through Schawk’s InterchangeDigital subsidiary, a software development company that develops software solutions for the marketing services departments of consumer products companies and pharmaceutical companies. Through its integrated software solution, PaRTS (Production and Resource Tracking System), InterchangeDigital works with clients to organize their digital assets, streamline their internal workflow and improve efficiency. The improved speed to market allows the consumer products companies to increase the number of promotions without increasing costs. This is very valuable to InterchangeDigital clients. The Company also offers digital three-dimensional modeling of prototypes or existing packages for its consumer products clients. This service is branded as Schawk 3-D and is included in the Enterprise Products service offering. Enterprise Products represent approximately 3% of the Company’s revenues.

      To capitalize on market trends, management believes that the Company must continue to be able to provide clients the ability to make numerous changes and enhancements with shorter turnaround times than ever before. Accordingly, the Company has focused its efforts on improving its response times and continues to invest in rapidly emerging technology and the continuing education of its employees. The Company also educates clients on the opportunities and complexities of state-of-the-art equipment and software. The Company believes that its ability to provide quick turnaround and delivery times, dependability and value-added training and education programs will continue to give it a competitive advantage in serving clients who require high volume, high quality product imagery.

      Over the course of its 51-year business history, the Company has developed strong relationships with many of the major converters and printers in the United States and Canada. As a result, the Company has extensive knowledge of their equipment, thereby enabling the Company to increase the overall efficiency of the printing process. Internal operating procedures and conditions may vary from printer to printer, affecting the quality of the color image. In order to minimize the effects of these variations, the Company makes necessary adjustments to its color separation work to account for irregularities or idiosyncrasies in the printing presses of each of its clients’ converters. The Company strives to afford its clients total control over their imaging processes with customized and coordinated services designed to fit each individual client’s particular needs, all aimed at ensuring that the color quality, accuracy and consistency of a client’s printed matter are maintained.

Acquisitions and Start-Up Operations

      The Company has acquired and integrated approximately 50 graphic and imaging businesses into its operations since 1965. Throughout its history, the Company has successfully identified acquisition candidates that represent market niche companies with Fortune 1000 client lists, excellent client service or proprietary products and solid management. The Company favors businesses with management teams that will continue to operate the businesses as semi-autonomous units. The Company has also commenced a number of start-up operations over the years when client servicing requirements or market conditions warranted.

      In late 2003, the Company purchased Blue Mint Associates and certain assets of Pixxon, Inc., both based in San Francisco, California. In addition, certain assets and the business of the prepress division of

Fort Dearborn Company, in suburban Chicago, were acquired effective as of January 1, 2004. In 2002 the Company purchased the remaining 35% of the Laserscan Group. Also in 2002, the Company’s Canadian subsidiary acquired certain assets and assumed certain liabilities of Imaginex, a Toronto area graphic company. There were no acquisitions in 2000 or 2001.

      Schawk Shenzhen, a graphic services consulting office in China and Anthem New York, a Schawk creative design office, were the only start-up operations in 2004. There were no start-ups established in 2003 or 2002. In 2001, the Company established an Anthem creative design operation in Chicago, Illinois. In 2000, the Company established a start-up operation in Singapore.

      On December 31, 2004, the Company acquired certain assets and the business of Weir Holdings, Ltd. (known as “Winnetts”), a UK based graphic services company with $38 million in revenues and operations in the UK, Belgium and Spain. Winnetts is the first operation in Europe for Schawk. This acquisition will allow us to expand our service offering over a greater global footprint as the only independent prepress firm with extensive global operations.

      Subsequent to year end 2004, on January 31, 2005, the Company acquired Seven Worldwide, Inc. (“Seven”) (formerly Applied Graphics Technologies, Inc.), a graphic services company with revenues of $370 million and operations in the United States, Europe, Asia and Australia. On a combined basis the Company has pro forma revenues of over $640 million based on 2004 results of each business.

      The Company intends to continue expanding through acquisitions of well-managed companies with solid market positions and established client lists. The Company believes that emphasis on complementary acquisitions of businesses serving targeted markets will allow it to broaden its product offerings and provide its clients with a single source for imaging and image database services. The Company will also continue to analyze and investigate start-up operations on an ongoing basis.

Research and Development

      The Company is dedicated to keeping abreast of and, in a number of cases, initiating technological process developments in its industry that have applications for consumer products packaging. To build upon its leadership position, the Company is actively involved in system and software technical evaluations of various computer systems and software manufacturers and also independently pursues software development for implementation at its operating facilities. The Company continually invests in new technology designed to support its high quality graphic services. The Company concentrates its efforts in understanding systems and equipment available in the marketplace and creating solutions using off-the-shelf products customized to meet a variety of specific client and internal requirements. PaRTS^tm and Schawk 3-D are examples of the Company’s commitment to research and development. Total research and development spending is not material.

      As an integral part of its commitment to research and development, the Company supports its internal STAB group as it researches and evaluates new technologies in the graphic arts and telecommunications industries. STAB meets quarterly to review new equipment and programs, and then disseminates the information to the entire Company and to clients as appropriate.

Marketing and Distribution

      The Company markets its services nationally and internationally through seminars, newsletters and training sessions targeted at existing and potential clients. The Company sells its services through a group of approximately 150 direct salespersons and 200 client service technicians who call on consumer products manufacturers, including those in the food and beverage, home products, pharmaceutical and cosmetics industries and mass merchant retailers. Both the Company’s salespersons and the Company’s client service technicians share responsibility for marketing the Company’s offerings to existing and potential clients, thereby fostering long-term institutional relationships with its clients.

      In addition to its numerous operations in the United States and Canada, the Company has operations in Mexico, the United Kingdom, Belgium, Spain, Japan, Singapore, Malaysia and China.

Clients

      The Company’s clients consist of direct purchasers of graphic services, including end-use consumer product manufacturers and mass merchant retailers, converters and advertising agencies. Many of the Company’s clients, a large percentage of which are Fortune 1000 companies, are multi-national in scope and often use numerous converters both domestically and internationally. Because these clients desire uniformity of color and image quality across a variety of media, the Company plays a very important role in coordinating their printing activities by maintaining current equipment specifications regarding its clients and converters. Management believes that this role has enabled the Company to establish closer and more stable relationships with these clients. Converters also have a great deal of confidence in the quality of the Company’s services and have worked closely with the Company to reduce the converters’ required lead-time, thereby lowering their costs. End-use clients often select and utilize the Company to ensure better control of their packaging or other needs and depend upon the Company to act as their agent to ensure quality management of data along with consistency among numerous converters and packaging media. The Company has established 44 on-site locations at or near clients that require high volume, specialized service. As its art production services continue to expand, the Company anticipates that it will further develop its on-site services to its client base.

      Many of the Company’s clients place orders on a daily and weekly basis and work closely with the Company year-round as they frequently redesign product packaging or introduce new products. While certain promotional activities are seasonal, such as those relating to summer, back-to-school time and holidays, shorter technology-driven graphic cycle time has enabled consumer products manufacturers to tie their promotional activities to regional and/or current events (such as sporting events or motion picture releases). This prompts such manufacturers to redesign their packages more frequently, resulting in a correspondingly higher number of packaging redesign assignments. This technology-driven trend toward more frequent packaging changes has offset previous seasonal fluctuations in the volume of the Company’s business (also see “Seasonality and Cyclicality”).

      In addition, consumer product manufacturers have a tendency to single-source their graphic work with respect to a particular product line so that continuity can be assured in changes to the product image. As a result, the Company has developed a base of steady clients in the food and beverage, health and beauty and home care industries. During 2004 no single client accounted for more than 7.0% of the Company’s net sales, and the 10 largest clients in the aggregate accounted for approximately 43% of net sales.

Competition

      The Company’s competition comes primarily from other independent color separators and converters and printers that have graphic service capabilities. The Company believes that approximately one-half of the Company’s target market is served by converters and printers, and the other one-half is served by independent color separators. Independent color separators are companies whose business is performing graphic services for one or more of the principal printing processes. Since the Company acquired Seven Worldwide, Inc. in January 2005, the Company believes that only three firms, Southern Graphics Systems, a subsidiary of Alcoa, Mathews International Corporation and Vertis, Inc. compete with the Company on a national or international basis in certain markets. The remaining independent color separators are regional or local firms that compete in specific markets. To remain competitive, each firm must maintain client relationships and recognize, develop and capitalize on state-of-the-art technology and contend with the increasing demands for speed.

      Some converters with graphic service capabilities compete with the Company by performing such services in connection with printing work. Independent color separators such as the Company, however, may offer greater technical capabilities, image quality control and speed of delivery. In addition, converters often utilize the services of the Company because of the rigorous demands being placed on them by clients who are requiring faster turnaround times. Increasingly, converters are being required to invest in technology to improve speed in the printing process and have avoided spending on graphic services technology.

      As requirements of speed continue to be critical, along with the recognition of the importance of focusing on their core competencies, clients have increasingly recognized that the Company provides services at a rate and cost that makes outsourcing more cost effective and efficient.

Purchasing and Raw Materials

      The Company purchases photographic film and chemicals, storage media, ink, plate materials and various other supplies and chemicals on consignment for use in its business. These items are purchased from a variety of sources and are available from a number of producers, both foreign and domestic. In 2004, materials and supplies accounted for $18.3 million or approximately 13.3% of the Company’s cost of sales, and no shortages are anticipated. Furthermore, as a growing proportion of the workflow is digital, the already low percentage of materials in cost of sales will continue to be reduced. Historically, the Company has negotiated and enjoys significant volume discounts on materials and supplies from most of its major suppliers.

Intellectual Property

      The Company owns no significant patents. The trademarks “Schawk,” and “PaRTS” and the trade names “Anthem New Jersey,” “Anthem New York,” “Anthem Los Angeles,” “Anthem San Francisco,” “Anthem Toronto,” “Anthem Chicago,” “Anthem Singapore,” “Schawk Asia,” “Schawk Atlanta,” “Schawk Cactus,” “Schawk Canada,” “Schawk Cherry Hill,” “Schawk Chicago,” “Schawk Chromart,” “Schawk Cincinnati 446,” “Schawk Cincinnati 447,” “Schawk Designer’s Atelier,” “Schawk Japan,” “Schawk Kalamazoo,” “Schawk Mexico,” “Schawk Milwaukee,” “Schawk Minneapolis,” “Schawk New York,” “Schawk Penang,” “Schawk St. Paul,” “Schawk Toronto” “Schawk Shanghai,” “Schawk Singapore,” “Schawk Stamford,” “Schawk 3-D,” “Interchange,” “InterchangeDigital,” “Interchange Digital Management Services,” “Laserscan,” and “Winnetts” are the most significant trademarks and trade names used by the Company or its subsidiaries.

Employees

      As of December 31, 2004 the Company had approximately 1,800 full-time employees. Of this number, approximately 22% are production employees represented by local units of the Graphic Communications International Union and by local units of the Communications, Energy & Paperworkers Union of Canada and the GPMU in the UK. The Company’s union employees are vital to its operations. Collective bargaining agreements covering the Company’s union employees in four facilities are subject to renegotiations. The Company considers its relationships with its employees and unions to be good.

Backlog

      The Company does not have or keep backlog figures, as projects or orders are generally in and out of the Company’s facilities within five to seven days. For the approximately one-half of total revenues that are not under contract, the Company maintains client relationships by delivering timely graphic services, providing technology enhancements to make the process more efficient and bringing extensive experience with and knowledge of printers and converters.

Seasonality and Cyclicality

      The Company’s digital imaging graphic business for the consumer product packaging graphic market is not currently seasonal because of the number of design changes that are able to be processed as a result of speed-to-market concepts and all-digital workflows. Increasingly, as demand for new products increases, traditional cycles related to timing of major brand redesign activitiy has gone from a three to four year cycle to a much shorter cycle. With respect to the advertising markets, some seasonality exists in that the months of December and January are typically the slowest months of the year in this market because advertising agencies and their clients typically finish their work by mid-December and do not start up again until mid-January. Advertising spending is generally cyclical as the consumer economy is cyclical. When consumer spending and GDP decreases, the amount of ad pages declines. Generally, when ad pages decline, the Company’s advertising business declines.

Available Information

      The Company’s website is www.schawk.com. Investors can obtain copies of the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the Company has filed such materials with, or furnished them to, the SEC. The Company will also furnish a paper copy of such filings free of charge upon request.

      The Company has adopted a code of ethics (the “Code of Ethics”), as required by the listing standards of the New York Stock Exchange and the rules of the SEC. This Code applies to all of the Company’s directors, officers and employees. The Company has also adopted a charter for its Audit Committee. The Company has posted the Code of Ethics and the Audit Committee Charter on its website and will post on its website any amendments to, or waivers from, its Code of Ethics applicable to any of the Company’s directors or executive officers. The foregoing information will also be available in print to any stockholder who requests such information.

      The Company owns or leases the following office and operating facilities:

      From time to time, the Company has been a party to routine pending or threatened legal proceedings and arbitrations. The Company insures some, but not all, of its exposure with respect to such proceedings. Based upon information presently available, and in light of legal and other defenses available to the Company, management does not consider the liability from any threatened or pending litigation to be material to the Company. The Company has not experienced any significant environmental problems.

      No items were submitted to a vote of security holders for the three months ended December 31, 2004.

PART II

Recent Sales of Unregistered Securities

      On April 30, 2004, the Company issued and sold $10 million of its 4.98% Series 2003-A Notes due 2014 to Massachusetts Mutual Life Insurance Company in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended. The proceeds of this offering were used to provide funds for acquisitions.

Stock Prices

      The Company’s Class A common stock is listed on the NYSE under the symbol “SGK”. The Company has approximately 923 stockholders of record as of March 1, 2005.

      Set forth below are the high and low sales prices for the Company’s Class A common stock for each quarterly period within the two most recent fiscal years.

Dividends Declared Per Class A Common Share

Equity Compensation Plan Information

      The following table summarizes information as of December 31, 2004, relating to equity compensation plans of the Company pursuant to which Common Stock is authorized for issuance (shares in thousands).

Purchases of Equity Securities by the Company

      The Company occasionally repurchases its common shares, pursuant to a general authorization from the Board of Directors. The Board of Directors reviews the authorization for management to repurchase shares on an annual basis. At a February 2004 meeting, the Board renewed its annual authorization to repurchase shares in accordance with applicable SEC rules. There were no repurchases of common stock by the Company under this program during 2004. However, during 2004, 44,000 shares of common stock with a market value of $603,000 were tendered to the Company by certain stockholders in payment of stock options exercised. The Company has recorded the receipt of common stock in payment for stock options exercised as a purchase of treasury stock.

      The following table summarizes the shares recorded by the Company as repurchases in connection with stock option exercises during 2004 (in thousands, except per share amounts):

(Thousands of dollars, except per share amounts)

      Certain statements contained herein and in “Item 1. Business” that relate to the Company’s beliefs or expectations as to future events are not statements of historical fact and are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The Company intends any such statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1999. Although the Company believes that the assumptions upon which such forward-looking statements are based are reasonable within the bounds of its knowledge of its business and operations, it can give no assurance the assumptions will prove to have been correct and undue reliance should not be placed as such statements. Important factors that could cause actual results to differ materially and adversely from the Company’s expectations and beliefs include, among other things, the strength of the United States economy in general and specifically market conditions for the consumer products industry, the level of demand for the Company’s services, loss of key management and operational personnel, the ability of the Company to implement its growth strategy, the stability of state, federal and foreign tax laws, the ability of the Company to identify and capitalize on industry trends and technological advances in the imaging industry, the stability of political conditions in Asia and other foreign countries in which the Company has production capabilities, terrorist attacks and the U.S. response to such attacks, as well as other factors detailed in the Company’s filings with the Securities and Exchange Commission. The Company assumes no obligation to update publicly any of these statements in light of future events.

EXECUTIVE-LEVEL OVERVIEW

      The Company’s revenues are driven by changes to consumer product packaging designs and promotions and advertising spending. Approximately 90% of the Company’s business is graphic services for consumer product packaging applications. Design changes of existing products and designs for new products have accelerated in frequency and in time between changes. There continue to be line extensions and promotions that take advantage of popular brand images in a variety of products. Packaging changes occur with such frequency and lack of notice, and customer turn-around requirements are so tight, that there is little backlog. There are regular promotions throughout the year that create revenue opportunities for the Company, for example: Valentine’s Day, Easter, Fourth of July, Back To School, Halloween, Thanksgiving and Christmas. In addition, there are event driven promotions that occur regularly, such as the Super Bowl, Grammy Awards, World Series, Indianapolis 500 and the Olympics. Lastly, there are a number of health related “banners” that are added to food and beverage packaging, such as “heart healthy”, “low in carbohydrates”, “enriched with essential vitamins”, “low in saturated fat” and “caffeine free”. All of these items require new product packaging designs or changes in existing designs and create revenue for the Company. In simple terms, change equals revenue.

      For the year ended December 31, 2004, the Company increased net sales (18.6%) and net income (33.5%) as a result of strong sales to consumer products companies both from existing accounts and new

accounts. Gross profits grew as a result of controlling costs of production and increasing productivity. Conversely, selling, general and administrative costs were up 18.2% as the Company’s selling costs increased from increased sales compensation and selling costs from businesses acquired. In addition, general and administrative costs increased from businesses acquired, increased costs related to compliance with Sarbanes Oxley Section 404 internal control requirements and increased accounting and auditing fees.

      The Company finished 2004 with very strong financial ratios in every category. The Company finished the year with a debt to equity ratio of 30.4% (with $40.0 million of long-term debt and $131 million of equity). In April 2004, the Company completed a private placement fixed-rate financing for $10 million of long-term debt. The debt has a ten year term and bears interest at 4.98%. In June 2004 the Company replaced its $65 million credit facility with a new unsecured five year, $30 million revolving credit facility. As of December 31, 2004, there were $14.5 million outstanding borrowings on the facility. The Company has no borrowings outside of the United States.

      The Company generates significant cash flow from operating activities: $26 million in 2004, $32 million in 2003 and $28 million in 2002. Cash flow from operating activities was lower in 2004 from 2003 primarily due to the increase in accounts receivable during 2004. The Company plans to focus on improving its collections in 2005 to increase cash flow from operating activities. Capital expenditures were $12 million in 2004, and dividends paid were $3 million leaving free cash flow of $11 million.

Important Acquisitions:

      On December 31, 2004, the Company acquired certain assets and the business of Weir Holdings, Ltd. (known as “Winnetts”), a UK based graphic services company with $38 million in revenues and operations in the UK, Belgium and Spain. The acquisition price was $23 million. Since the acquisition occurred as of the close of business on December 31, 2004, there are no results of operations in the 2004 Statement of Operations, but the assets and liabilities of Winnetts that were acquired are included in the 2004 year end Balance Sheet of the Company. Winnetts is the first operation in Europe for Schawk. This acquisition will allow the Company to expand its service offering over a greater global footprint as the only independent prepress firm with extensive global operations.

      Subsequent to year end 2004, on January 31, 2005, the Company acquired Seven Worldwide, Inc. (“Seven”) (formerly Applied Graphics Technologies, Inc.), a $370 million in revenue graphic services company with operations in 35 locations in the United States, Europe, Asia and Australia. On a combined basis the Company has pro forma revenues of over $646 million based on 2004 results of each business.

      In summary, 2004 was a very successful year with record revenues, net income and earnings per share. The Company executed on its strategic plan and improved its global coverage with the acquisition of Winnetts and more than doubled the size of the Company after year end by acquiring Seven.

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2004 and 2003

Schawk, Inc.

Comparative Consolidated Statements of Operations

Years Ended December 31, 2004 and 2003

nm — Percentage not meaningful

      Net sales — For the year ended December 31, 2004, net sales were $238.3 million, compared to $201.0 million for the prior year, an 18.6 percent increase. 11.7% of the growth in sales was from internal growth and 6.9% was from acquired businesses. Schawk’s direct consumer products packaging related business was strong in 2004, as a result of increased demand from both new product introductions by consumer products companies and from regulatory requirements like trans fats disclosures on food packages. In addition, the Company won new accounts in 2004 and realized the full year impact of new accounts won in 2003.

      Gross margin for the year ended December 31, 2004, was 42.5 percent compared to 40.4 percent in the prior year. The higher gross margin is primarily due to the increase in sales and increased productivity levels.

      Operating income for 2004 was $37.8 million versus $27.5 million in 2003. The increase in operating income was primarily due to increased sales and higher productivity levels. Selling, general and administrative expenses increased $9.8 million or 18.2% as compared to the prior year. The increased operating costs were from primarily from a combination of three factors:

The operating margin for 2004 was 15.9 percent compared to 13.7 percent in the prior year for the same reasons that operating income increased.

      Other income (expense) for the year ended December 31, 2004, was $1.8 million of expense, compared to $0.3 million of expense in the prior year. The $1.5 million increase in expense was primarily due to the following non-recurring other income items in 2003: favorable litigation settlement of $0.4 million; favorable resolution of a contingency related to a prior disposition of a business of $0.5 million and proceeds from a life insurance policy of $0.4 million.

      Income tax provision for the year ended December 31, 2004, was at an effective rate of 37.0 percent as anticipated. The effective rate in 2003 was 37.7 percent.

      Net income for the year ended December 31, 2004 increased significantly versus 2003 for the reasons previously discussed.

      Basic and diluted earnings per share were $1.05 and $1.01, respectively, for the year ended December 31, 2004 compared with $0.79 and $0.78 for 2003.

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2003 and 2002

Schawk, Inc.

Comparative Consolidated Statements of Operations

Years Ended December 31, 2003 and 2002

nm — Percentage not meaningful

      Net sales — For the year ended December 31, 2003, net sales were $201.0 million, compared to $186.2 million for the prior year, an 8.0 percent increase. Substantially all of the growth in sales was from internal growth, not from acquisitions. Schawk’s direct consumer products packaging related business was strong in 2003, as it increased 9.8 percent. New accounts added to the Company’s client roster in 2003 also contributed to the sales growth. Consumer products companies added a number of line extensions and promotions to their most popular food and beverage brands in 2003, increasing volume for Schawk. However, the Company’s advertising agency business was down 3.1 percent for the full year 2003 due to decreased advertising agency spending.

      Gross margin for the year ended December 31, 2003, was 40.4 percent compared to 39.1 percent in the prior year. The higher gross margin is primarily due to the increase in sales, as well as a reduction in material usage, as computer to plate workflows reduce the need for photographic film.

      Operating income for 2003 was $27.5 million versus $22.0 million in 2002. The increase in operating income was primarily due to increased sales and lower costs as a result of efficiency-related efforts over the past two years. In addition, incorporated in the calculation of operating income for 2002 were $2.6 million of special charges, including $2.2 million for impairment of long-lived assets and $0.4 million of severance costs classified as restructuring and other charges. No significant asset impairments were noted in 2003. The operating margin for 2003 was 13.7 percent compared to 11.8 percent in the prior year for the same reasons that operating income increased.

      Other income (expense) for the year ended December 31, 2003, was $0.3 million of expense, compared to $2.3 million of expense in the prior year. The $2.0 million decrease in expense was due to the following items: lower net interest expense of $0.7 million from lower rates and lower borrowing levels; favorable litigation settlement of $0.4 million; favorable resolution of a contingency related to a prior disposition of a business of $0.5 million and proceeds from a life insurance policy of $0.4 million.

      Income tax provision for the year ended December 31, 2003, was at an effective rate of 37.7 percent. The effective rate in 2002 was 31.5 percent; significantly lower than 2003 due to state tax refunds and the settlement of an outstanding tax obligation.

      Net income for the year ended December 31, 2003 increased significantly versus 2002 for the reasons previously discussed.

      Basic and diluted earnings per share were $0.79 and $0.78, respectively, for the year ended December 31, 2003 compared with $0.63 and $0.62 for 2002.

Liquidity and Capital Resources

      As of December 31, 2004, the Company had $7.3 million in consolidated cash and cash equivalents, compared to $5.2 million at December 31, 2003.

      The Company presently finances its business from available cash, a revolving credit facility and from cash generated from operations. Cash generated from operations in 2004 totaled $26.4 million, a decrease of $5.8 million from 2003. The lower cash from operations in 2004 was due to an increase in trade receivables in 2004 from an 18.6% increase in revenues that is anticipated be collected in 2005.

      The Company entered into a $30 million revolving credit facility in June 2004 to replace an expired $65 million credit facility. From June 2004 to December 30, 2004 there were no outstanding borrowings on the company’s credit facility. At December 31, 2004, the Company had $14.5 million of borrowings on its $30 million credit facility, substantially all of which was borrowed on December 31, 2004 to finance the acquisition of certain assets of Weir Holdings, Ltd. (“Winnetts”) a UK based graphic services company with approximately $38 million of annual revenue. The acquisition price was $23 million and was funded utilizing $8.5 million of cash and a $14.5 million draw on the revolving credit facility.

      Long-term debt increased to $39.5 million at December 31, 2004 from $21.0 million at December 31, 2003. During 2004, the Company made payments of $8.7 million to reduce its unsecured credit facility to zero until the Winnetts funding on the last day of the year and $6.0 million on its outstanding Series B notes due

2005. As discussed previously, in December 2003, the Company entered into a private placement of debt to provide long-term financing. The terms of the Note Purchase Agreement relating to this transaction provide for the issuance and sale by the Company, pursuant to an exception from the registration requirements of the Securities Act of 1933, of two notes: 1) Tranche A, due December 31, 2013, for $15 million, which closed in December 2003; and, 2) Tranche B, due April 30, 2014, for $10 million, which closed in April 2004.

      At December 31, 2004, outstanding debt of the Company consisted of: (i) $14.5 million outstanding on it unsecured revolving credit facility as described previously; (ii) unsecured notes issued pursuant to a Note Purchase Agreement dated August 18, 1995, for $6.0 million with a final principal payment in August 2005, at an interest rate of 6.98% (classified as current portion of long-term debt on the balance sheet); and (iii) $15.0 million of its unsecured Series 2003-A Notes due 2013, with annual principal payments from 2007 through 2013, at an interest rate of 4.90% and $10 million of its unsecured Series 2004-B Notes due 2014 with annual principal payments from 2008 through 2014, at an interest rate of 4.98%.

      Subsequent to year end 2004, on January 31, 2005, the Company acquired Seven Worldwide, Inc. (“Seven”) a New York based graphic services business with $370 million in revenue and operations in the United States, United Kingdom, Asia and Australia for a purchase price of $191 million. The purchase price was payable $122.4 million in cash and $68.6 million in Schawk common stock. To finance the cash portion of the purchase price, the Company entered into a new unsecured, five year, $100 million credit facility. Financial covenants of the new credit facility are essentially the same as under the existing agreement. Interest rates are at floating rates over LIBOR and are at spreads that are at, or lower than, spreads in the then existing agreement.

      In January 2005 the Company also entered into a private placement of debt to provide long-term financing related to the Seven acquisition. The terms of the note purchase agreement relating to this transaction (the “Seven Notes”) provide for the issuance and sale by the Company, pursuant to an exception from the registration requirements of the Securities Act of 1933, of a series of notes totaling $50 million. The notes mature in 2010 through 2012 and bear interest in a range of 4.81% to 5.17%.

      Management believes that the level of working capital is adequate for the Company’s liquidity needs related to normal operations both currently and in the foreseeable future, and that the Company has sufficient resources to support its growth, either through currently available cash and cash generated from future operations, or pursuant to the Note Purchase Agreement dated December 23, 2003 and short-term credit facilities.

      The Company had capital expenditures, principally for equipment and computer hardware and software to improve productivity, of $12.2 million, $6.9 million, and $7.6 million in 2004, 2003, and 2002 respectively.

      The Company had depreciation of $11.8 million in 2004, $11.4 million in 2003 and $12.0 million in 2002.

      The Company paid $29.3 million for acquisitions in 2004 and $2.1 million in both 2003 and 2002. See Note 6 to the Consolidated Financial Statements for further information regarding acquisitions.

      The Company purchased $0.6 million, $2.3 million, and $1.0 million in Class A Common Stock in 2004, 2003, and 2002, respectively, under a share repurchase program approved by the Board of Directors.

Off-Balance Sheet Arrangements and Contractual Obligations

      The Company does not have any material off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

      The following table summarizes the effect that minimum debt, lease and other material noncancelable commitments listed below are expected to have on the Company’s cash flow in the future periods set forth below:

      Purchase obligations resulting from purchase orders entered in the normal course of business are not significant. The Company is a service business whose major cost is employees’ labor. Material purchases are limited to supplies incidental to the services provided.

      The Company expects to fund future contractual obligations through funds generated from operations, together with general company financing transactions.

Critical Accounting Policies

      The discussion and analysis of our financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that effect the reported amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.

      Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. We believe that our critical accounting policies are limited to those described below. For a detailed discussion on the application of these and other accounting policies, see Note 2 in the notes to the Consolidated Financial Statements.

      Accounts Receivable. The Company’s clients are primarily consumer product manufacturers, converters and advertising agencies; none of which individually represent more than 7.0% of total revenue. Accounts receivable consist primarily of amounts due to us from our normal business activities. We maintain an allowance for doubtful accounts to reflect the expected losses of accounts receivable based on past collection history and specific risks identified in the portfolio.

      Impairment of Long-Lived Assets. The Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those items. Our cash flow estimates are based on historical results adjusted to reflect our best estimate of future market and operating conditions. The net carrying value of assets not recoverable is reduced to fair value. Our estimates of fair value represent our best estimate based on industry trends and reference to market rates and transactions.

      Goodwill and Other Acquired Intangible Assets. The Company has made acquisitions in the past that included a significant amount of goodwill and other intangible assets. Effective in 2002, goodwill is no longer amortized but is subject to an annual (or under certain circumstances more frequent) impairment test based on its estimated fair value. Other intangible assets that meet certain criteria continue to be amortized over their useful lives and are also subject to an impairment test based on estimated undiscounted cash flows. There are many assumptions and estimates underlying the determination of an impairment loss. Another estimate

using different, but still reasonable, assumptions could produce a significantly different result. Therefore, impairment losses could be recorded in the future.

      The Company performed the required impairment test of goodwill and indefinite-lived intangible assets in 2004, 2003 and 2002. It was determined appropriate to consider the Company to be one reporting unit for purposes of this test.

      Customer Rebates. The Company has rebate agreements with certain customers. The agreements offer discount pricing based on volume over a multi-year period. The Company accrues the estimated rebates over the term of the agreement, reducing revenue and crediting a current liability account. At the end of the rebate accounting period, typically annually, the rebate is settled in cash and the accrued liability account is charged. The Company accounts for changes in the estimated rebate amounts as soon as it has determined that the estimated sales for the rebate period have changed.

      Income Taxes. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets arising from temporary differences and net operating losses will not be realized.

      The Company, like other multi-national companies, is regularly audited by federal, state and foreign tax authorities, and tax assessments may arise several years after tax returns have been filed. Accordingly, tax reserves have been recorded when, in management’s judgment, it is not probable that the Company’s tax position will ultimately be sustained. While predicting the outcome of the audits involves uncertainty and requires estimates and informed judgments, we believe that the recorded tax liabilities are adequate and appropriate. The judgments and estimates made at a point in time may change based on the outcome of tax audits, as well as changes to or further interpretation of regulations. Income tax expense is adjusted in the period in which these events occur or when the statute of limitations for a specific exposure item has expired.

      Restructuring Reserves. The Company records reserves for the operational restructuring of acquired companies. The restructuring plans are approved by Company management prior to, or shortly after, the acquisition date and may be modified during the twelve month period following the acquisition, as conditions change. The restructuring plans provide for severance pay, lease abandonment costs and other expenses.

New Accounting Pronouncements

      In December 2004, the FASB issued SFAS 123(R) (revised December 2004), “Share-Based Payment”, which is a revision of SFAS 123, “Accounting for Stock-Based Compensation,” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” This statement requires that the fair value at the grant date resulting from all share-based payment transactions be recognized in the financial statements. Further, SFAS 123(R) requires entities to apply a fair-value based measurement method in accounting for these transactions. This value is recorded over the vesting period. This statement is effective for the first interim reporting period beginning after June 15, 2005. The Company is currently evaluating the provisions of SFAS 123(R), and the impact on its consolidated financial position and results of operations.

Impact of Inflation

      The Company believes that over the past three years inflation has not had a significant impact on the Company’s results of operations.

Interest Rate Exposure

      The Company has $14.5 million of variable rate debt outstanding at December 31, 2004 and expects to use its variable rate credit facilities during 2005 and beyond to fund acquisitions and cash flow needs. Assuming interest rate volatility in the future similar to what has been seen in recent years, the Company does

not anticipate that short-term changes in interest rates will materially affect its consolidated financial position, results of operation, or cash flows. A 1.0% increase in short term interest rates would add $145 of interest cost annually, based on the variable rate debt outstanding at December 31, 2004.

Foreign Exchange Exposure

      The Company has foreign operations that expose it to translation risk when the local currency financial statements are translated to U.S. dollars. Since changes in translation risk are reported as adjustments to stockholders’ equity, a 10% change in the foreign exchange rate would not have material effect on the Company’s financial position, results of operations or cash flows.

MANAGEMENT’S RESPONSIBILITIES FOR FINANCIAL REPORTING

      The management of Schawk, Inc. is responsible for the preparation and integrity of all financial statements and other information contained in the Schawk, Inc. Form 10-K Annual Report. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles and necessarily include amounts based on judgments and estimates by management giving due consideration to materiality. The Company maintains internal control systems designed to provide reasonable assurance that the Company’s financial records reflect the transactions of the Company and that its assets are protected from loss or unauthorized use.

      The Company’s financial statements have been audited by Ernst & Young LLP, independent registered public accounting firm, whose report thereon follows. As part of their audit of the Company’s financial statements, Ernst & Young LLP considered the Company’s system of internal control to the extent they deemed necessary to determine the nature, timing and extent of their audit tests. Management has made available to Ernst & Young LLP the Company’s financial records and related data.

      The Audit Committee of the Board of Directors is responsible for reviewing and evaluating the overall performance of the Company’s financial reporting and accounting practices. The Committee meets periodically and independently with management and the independent registered public accounting firm to discuss the Company’s internal accounting controls, auditing and financial reporting matters. The independent registered public accounting firm has unrestricted access to the Audit Committee.

/s/ David A. Schawk

David A. Schawk

President and Chief Executive Officer

Principal Executive Officer

/s/ James J. Patterson

James J. Patterson

Senior Vice President and Chief Financial Officer

Principal Financial and Accounting Officer

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Schawk, Inc.

      We have audited the accompanying consolidated balance sheets of Schawk, Inc. as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004. Our audits also include the financial statement schedule listed in the index at item 15(a). These financial statements and schedule are the responsibility of Schawk, Inc. management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

      We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States.) Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Schawk, Inc. at December 31, 2004 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

Chicago, Illinois

February 11, 2005

Schawk, Inc.

Consolidated Balance Sheets

See accompanying notes.

Schawk, Inc.

Consolidated Statements of Operations

See accompanying notes.

Schawk, Inc.

Consolidated Statements of Cash Flows

Schawk, Inc.

Consolidated Statements of Stockholders’ Equity

Years Ended December 31, 2002, 2003 and 2004

See accompanying notes.

Schawk, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

      Schawk, Inc. including its subsidiaries (the Company) is a leading provider of digital imaging graphic services for the consumer products industry in North America, UK/ Europe and Asia. The Company focuses on providing these services to multi-national clients in three primary markets: consumer products packaging, advertising agencies and promotion.

      The Company has collective bargaining agreements with production employees representing approximately 22% of its workforce. The significant contracts are with local units of the Graphic Communications International Union, the Communications, Energy & Paperworkers Union of Canada and the Amicus and GPMU union of the UK and expire in 2005 through 2009. The percentage of employee covered by contracts expiring within one year is approximately 14%.

Principles of Consolidation

      The consolidated financial statements include the accounts of all wholly and majority owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Revenue Recognition

      The Company recognizes revenue at the later of delivery of the goods and/or services to the customer or the acceptance of the goods and/or services by the customer.

Cash Equivalents

      Cash equivalents include highly liquid debt instruments and time deposits with an original maturity of three months or less. Cash equivalents are stated at cost, which approximates market.

Accounts Receivable and Concentration of Credit Risk

      The Company sells its products to a wide range of customers in the consumer products industry. The Company performs ongoing credit evaluations of its customers and does not require collateral. An allowance for doubtful accounts is maintained at a level management believes is sufficient to cover potential losses. The Company evaluates the collectibility of its accounts receivable based on the length of time the receivable is past due and its historic experience of write-offs. Trade accounts receivable are charged to the allowance when the Company determines that the receivable will not be collectible. Trade accounts receivable balances are determined to be delinquent when the amount is past due, based on the payment terms with the customer.

Inventories

      Inventories are stated at the lower of cost or market. Certain inventories, which approximate 16% of total inventories in 2004 and 2003 are determined on the last in, first out (LIFO) cost basis. The remaining inventories are determined on the first in, first out (FIFO) cost basis.

Property and Equipment

      Property and equipment, including capitalized leases is stated at cost, less accumulated depreciation and amortization, and is being depreciated and amortized using the straight-line method over the estimated useful lives of the assets or the term of the leases, ranging from 3 to 40 years.

Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

Goodwill

      Effective January 1, 2002, the Company adopted Statements of Financial Accounting Standards No. (SFAS) 141 Business Combinations and No. 142 Goodwill and Other Intangible Assets. SFAS No. 142 does not permit goodwill and indefinite-lived intangibles to be amortized, but requires that these assets be reviewed at least annually for possible impairment.

      The Company performed the required impairment test of goodwill and indefinite-lived intangible assets in 2004, 2003 and 2002. It was determined appropriate to consider the Company to be one reporting unit for purposes of this test. No impairment charge was required to be recorded in 2004, 2003 or 2002.

Long-lived Assets

      Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-lived Assets. In accordance with SFAS 144, when events or conditions indicate a potential impairment, the Company evaluates the carrying value of long-lived assets, including intangible assets, based upon current and expected undiscounted cash flows, and recognizes an impairment when the estimated cash flows are less than the carrying value of the asset. See Note 5 for further information regarding impairment of long-lived assets.

Customer Rebates

      The Company has rebate agreements with certain customers. The agreements offer discount pricing based on volume over a multi-year period. The Company accrues the estimated rebates over the term of the agreement, reducing revenue and crediting a current liability account. At the end of the rebate accounting period, typically annually, the rebate is settled in cash and the accrued liability account is charged. The Company accounts for changes in the estimated rebate amounts as soon as it has determined that the estimated sales for the rebate period have changed.

Shipping and Handling Fees and Costs

      Shipping and handling fees billed to customers for product shipments are recorded in “Net sales” in the Consolidated Statements of Operations. Shipping and handling costs are included in inventory for jobs-in-progress and included in “Cost of sales” in the Consolidated Statements of Operations when jobs are completed and invoiced.

Income Taxes

      Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets arising from temporary differences and net operating losses will not be realized.

      The Company, like other multi-national companies, is regularly audited by federal, state and foreign tax authorities, and tax assessments may arise several years after tax returns have been filed. Accordingly, tax reserves have been recorded when, in management’s judgment, it is not probable that the Company’s tax position will ultimately be sustained. While predicting the outcome of the audits involves uncertainty and requires estimates and informed judgments, we believe that the recorded tax liabilities are adequate and appropriate. The judgments and estimates made at a point in time may change based on the outcome of tax audits, as well as changes to or further interpretation of regulations. Income tax expense is adjusted in the period in which these events occur or when the statute of limitations for a specific exposure item has expired.

Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

Use of Estimates

      The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign Currency Translation

      The Company’s foreign subsidiaries use the local currency as their functional currency. Accordingly, foreign currency assets and liabilities are translated at the rate of exchange existing at year-end and income and expense amounts are translated at the average of the monthly exchange rates. Adjustments resulting from the translation of foreign currency financial statements are included in accumulated comprehensive income (loss) as a component of stockholders’ equity.

Fair Value of Financial Instruments

      For purposes of financial reporting, the Company has determined that the fair value of financial instruments including cash and cash equivalents, accounts receivable, accounts payable and long-term debt approximates book value based on terms available to the Company in financial markets at December 31, 2004 and 2003.

Comprehensive Income

      The components of comprehensive income, net of related tax, for the years ended December 31, 2004, 2003 and 2002 are as follows:

Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

Stock Based Compensation

      At December 31, 2004, the Company has two stock-based employee compensation plans, which are described more fully in Note 17. The Company accounts for these plans under the recognition and measurement principles of Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees”, and related interpretations. No stock-based employee compensation cost is reflected in the net income, as all options granted under these plans have an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”, to stock-based employee compensation.

Reclassifications

      Certain amounts in the 2003 and 2002 financial statements have been reclassified to conform to the 2004 presentations.

      In December 2004, the FASB issued SFAS 123(R) (revised December 2004), “Share-Based Payment”, which is a revision of SFAS 123, “Accounting for Stock-Based Compensation,” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” This statement requires that the fair value at the grant date resulting from all share-based payment transactions be recognized in the financial statements. Further, SFAS 123(R) requires entities to apply a fair-value based measurement method in accounting for these transactions. This value is recorded over the vesting period. This statement is effective for the first interim reporting period beginning after June 15, 2005 . We are currently evaluating the provisions of SFAS 123(R), and the impact on our consolidated financial position and results of operations.

2002 Actions

      During the third quarter of 2002, a total of 16 positions were eliminated at an east coast facility due to a decline in the advertising business. A provision for severance pay and other employee benefits in the amount of $421 was recorded. Although this staff reduction was not part of a formal restructuring plan, the charge for severance and other employee benefits was included in “Restructuring and other charges” on the Consolidated

Schawk, Inc.

Notes to Consolidated Financial Statements — (Continued)

Statement of Operations. As of December 31, 2004, $392 of the severance pay provision has been paid; $29 remains unpaid and is included in accrued expenses on the Consolidated Balance Sheet.

      There were no restructuring charges in 2003 or 2004.

Summary: